History Of Apple: Where Did Steve Jobs Go Wrong?

Everybody knows what the Big Apple is, right? New York City, baby. The be-all and end-all of urbanism. The coolest, hippest metropolis on earth. The one everyone else imitates. Power Town. The mother of all cities, etc. etc.

Not so fast. Recently there’s another Big Apple that has come onto the scene. The Apple. The be-all and end-all of commerce. The coolest, hippest corporation on the planet. The one everyone else imitates. The mother of all companies, etc. etc.

In this course we’re going to look at the other Big Apple. And the comparison with New York City is apt. Apple really is like New York in so many ways. Dynamic. Full of energy. Cutting edge. And a company that, like New York, has in its past fallen on hard times and had to reinvent itself.

We’ll look at how it got started, why it became a success and how it almost died. Later, we’ll look at how Apple found a new identity and became a HUGE success—turning itself into a company whose 2015 global revenues equaled 1.25% of America’s GDP. BIG Apple indeed!

Finally, we’ll look at the risks and threats Apple faces in the future. Yup, despite its growth, it ain’t all peachy for this company. That’s because life in the cutthroat world of tech is never just a bowl of cherries. (Just ask former tech champ Blackberry: it used to be a plum investment, but then it went all pear-shaped and is now it’s just a lemon.) So if you’re ready, grab your fork and knife and let’s dive into that big old fashioned american Apple pie.

Steve and Steve

Steve Jobs. That’s the name we all associate with Apple. And what a great name for a company founder—someone who’s going to create a lot of jobs.

But there’s a second name, too: Steve Wozniak. And that one’s even better. Because the first electronic general-purpose computer was called ENIAC: Electronic Numerical Integrator And Computer–and “Wozniak” is close enough to sound like the next generation device in that series.

Which kinda makes sense, because Apple really started the home computer revolution. Its first product was the Apple I, a breakthrough in personal computing, that took the company from Steve’s garage to the world stage. The Apple I was primitive by today’s standards, but it featured a simple yet powerful design that made the company’s reputation as a customer-focused innovator.

And then they outdid their debut. In April 1977 they presented the world with the Apple II. This was a major leap over the Apple I, featuring cutting-edge graphics (eventually delivered in full color), powerful applications and an easy, out-of-the-box setup. Together with early models from Commodore and Tandy, the Apple II is generally credited with getting the world to accept the idea of a computer in people’s homes. It was the first computer many people ever saw, and it lasted in production for almost 17 years–an almost unimaginable lifespan. And it had so much useful business software that it prompted IBM to create the IBM personal computer. It made Apple a leader in the business.

And what a leader it was!

In its first three years, Apple enjoyed sales growth of over 500% annually! The company reached annual revenues of over $100 million—all that money from a company that Steve Jobs had literally started in his parents’ garage. Even though it had secured startup funding, The Apple Computer Company (today called Apple inc)had grown so fast that angel investors simply weren’t rich enough to keep the company going. By year four, it was time for an Initial Public Offering (IPO).

In true Apple fashion, nothing is done quietly. Its IPO was one of the splashiest ever. The company went public in December of 1980 and raised more money than any IPO since Ford Motor Company 24 years earlier. In doing so, it also created more millionaires than any company had ever done in the history of capitalism.

No Job Jobs

After launching the Apple III in 1980, the company went to work on a new technology called a GUI—Graphical User Interface. That’s the technology we all use today in the form of a mouse, which lets you roam all over the screen and click wherever you want. Before that, every command you made to your computer had to be input through your keyboard. Kind of like sending a text message before phones had full keyboards ……BRUTAL!

The vehicle for the GUI was an Apple computer called the Lisa. It was a total flop, costing way too much to succeed as a commercial product, and it didn’t even perform particularly well. Fortunately for Apple, though, it had another trick up its sleeve: the Macintosh.

Big Apple makes Big Mac

As we all know, the Macintosh is an icon of personal computing. It was introduced to the market in January of 1984, with what is probably the most famous TV commercial of all time, aired during the Super Bowl. That ad cost $1.5 million, and it created a buzz around the Macintosh that still lasts today. Oh, and the commercial doesn’t even include any direct reference to the Macintosh product. Talk about hype.

But the Macintosh wasn’t all just hype. It was a much cheaper equivalent to the Lisa, and it performed significantly better. It was enormously popular among graphic designers—both amateurs and pros—and singlehandedly launched the field of desktop publishing. Above all, by introducing the mouse, it revolutionized personal computing. It made complex tasks easy by making them intuitive, and turned computing into something fun.

The Macintosh wasn’t without its problems, however. Even though it was cheaper than the Lisa, it was still very expensive, and couldn’t compete with the IBM PC on price. Financially, it was draining the company, and this led to internal disputes at Apple. Jobs wanted more resources to be spent on the Macintosh, because he felt it had greater potential as a computer. The board, however, wanted to focus on the Apple II, which had proven itself as a product. This led to a long power struggle which ended with the then CEO of Apple, John Sculley, firing Jobs. It looked like the end of the road for Jobs at Apple.

Return of the Mac

The fight between Jobs and Sculley wasn’t just a clash of egos. It was actually a dispute over which direction the company should follow, with Sculley arguing that Apple should focus on premium products that allowed it to charge huge markups. Later, Jobs himself admitted that his indifference to financial considerations was a mistake. He was young and arrogant, and didn’t understand that as a public company Apple had shareholders to answer to.

But his instincts were, overall, correct. For a few years, it seemed as if Sculley’s strategy was right . But soon enough, Microsoft began to catch on—this GUI thing was cool! Personal computers (PCs) that used Microsoft software started to incorporate the mouse and the cool applications that went along with it. These computers now had the same functions as the Apple II, AND they were way cheaper.

Rotten Apple

Apple’s sales began to slide. The company fought back with the kind of lower-cost models that Jobs had argued for, and even developed its own laptop—a product that it had shied away from in its earliest years. The strategy bought Apple some time, but not much. Sales of the Mac were good, but they were cannibalizing sales of the more expensive Apple series of computers. And meanwhile, Microsoft kept hammering away, offering a computer experience with Windows that wasn’t great, but wasn’t that bad, either…

Throughout the 1990s, Apple thrashed around in a losing battle for market share with Microsoft. The company came out with new products, from CD players to digital cameras. It developed touchscreen technology. It produced an early version of the tablet. And it worked on new operating systems—on its own and together with giants like IBM.

Nothing worked. Microsoft came to monopolize the computer market, and Apple just kept getting more brown and mouldy and unappealing. Its stock tanked.

Bring back jobs

As a final roll of the dice, Apple brought back Steve Jobs.

After leaving Apple, Jobs had founded a new company called NeXT. It sold computers, and judging by sales alone, it wasn’t very impressive: an estimated 50,000 units sold over more than a decade.

But despite its pathetic sales figures, NeXT was onto something. Its operating system was actually critical in developing something called the world wide web. Yeah, that world wide web. The Internet. No one could deny, Jobs was a visionary and Apple needed help!

Someone at Apple must have figured out that the internet was going to be humongous. Maybe it was the Apple board. But for whatever reason, the decision to bring Jobs back was one of the most important business decisions of its time. The NeXT operating system was merged with Apple’s existing OS to form OS X. And that marked a new era in the history of personal computers.

iKnew Apple Would Win All Along

Jobs drove the company in a new direction. He believed that consumers would want devices that would maximize the power the web offered, and he realized that Apple needed to be more than just a computer company—it needed to be a consumer products company.

OS X was an important part of that evolution. It proved to be a remarkably powerful operating system that most computer geeks agreed was better than Windows. But an operating system alone wasn’t going to transform Apple—it was all the stuff that went along with it that really changed the company.

Get an iLife

Jobs started by building on OsX, with lots of great digital software that made a computer more than just a computer: software like iMovie, for making home videos; and iDVD, for sharing those videos on DVDs; and GarageBand, for producing your own music; and iPhoto, for managing digital photos with a few clicks of the mouse. They all formed part of the iLife suite of products that everybody now wanted to have.

That was only the beginning, though. Jobs also recognized that digital technology presented new opportunities in consumer electronics. He directed Apple to develop a new product for storing and listening to music, and in 2001 the iPod was born. It was a huge success, and was quickly followed by the iTunes Store, which let people buy single songs for as little as 99 cents. Not only did iTunes put a big dent into illegal downloading, it also turned Apple into the world’s leading provider of online music services.

Jobs also departed from the norm when it came to physical design. He put design wizard Jonathan Ive in charge of the look of all Apple products, and Ive surprised the world by turning computers into cool machines with sleek lines, flat panels and titanium shells. It was the right move, as the new iMac and MacBook Pro computers made people who owned them feel—if only briefly—as if they were living in a James Bond movie.

But there’s more!

As Apple rolled out innovation after innovation, its stock skyrocketed. By 2006, Apple’s market capitalization exceeded that of Dell—the largest PC maker in the world. But that still wasn’t enough for Jobs…

Over the next few years Apple introduced the iPhone and the iPad, two products that clobbered the competition and turned mobile devices into fully functioning computers. Their success spawned the “app revolution,” as developers from around the world rushed to produce new software applications that could be easily downloaded onto phones and tablets. With the opening of retail Apple stores and the online Mac App Store, the company had become what Jobs had long dreamed of—a provider of consumer electronics that put the power of the digital revolution in the hands of the people.

Fresh Apple Stock

In addition to putting the internet in the hands of the people, Apple also put a ton of money into the pockets of its investors.

The company’s growth in the first 15 years of the 21st century was truly phenomenal. In 2007 its share price broke the $100 mark. In 2010 shares were trading at more than $300, and its market cap was bigger than Microsoft’s. In 2015, it became the first company in history to reach a market valuation of over $700 billion—more than twice as large as Microsoft and representing a share price increase of 50,800% since the day it first went public in December 1980.

But does all that success mean Apple is a good bet today? Well, as the old disclaimer goes: “Past performance is not indicative of future results.”

Golden Delicious or Crab Apple?

Massive growth in value is often a sign that a company is on to something big.

It’s also often a sign that it WAS on to something big, but investors have recognized it and there’s no longer a lot of money to be made in it.

With Apple, it’s hard to be sure which is which.

On the plus side for Apple, it has a long history of innovation. It has a great design team. It has huge brand recognition, a massive customer base and mountains of cash. All those things argue strongly for Apple as a good buy for the future. There’s a lot more money to be made in tech, and Apple is sure to be thinking of ways of doing that—ways we haven’t even thought of.

On the negative side, Apple no longer really has that elusive Wow! factor. When Blackberry was dominating the phone market, everyone thought it was invincible. Then Apple came out with the iPhone in 2007 and crushed Blackberry like a…well, like a blackberry.

With Steve Jobs gone, some of the community believed that Apple’s innovative ideas would leave with him. Only time can tell if the company can hold on to Jobs’ vision and continue to be one of the world’s leading innovators in consumer electronics and computers.

Do unto others…

But just as Apple started to dominate the smartphone market, it too got knocked off the perch. That’s because Google came out with its Android operating system for mobile phones.

Android is now the king of the heap in the world of smartphones. Google licenses the technology to other manufacturers, who are able to produce phones much more cheaply than Apple. Sure, the iPhone is still popular—but it is no longer the exciting product it was when it first arrived, and there doesn’t seem to be anything to replace it.

And that makes you think Apple’s best days might be behind it. In computers, Microsoft has come out with its Surface laptops, which many market watchers think are as good as the MacBook. In smartphones, Samsung and LG are delivering products that are just as slick and convenient as the iPhone. In services, Google and Microsoft are offering cloud computing that matches the service Apple pioneered with MobileMe.

The competition is catching up, and the market knows it. In 2016, Apple set a milestone: its sales figures began to decline, bringing to an end 51 consecutive quarters of growth. The smartphone market became saturated, fewer people felt compelled to upgrade to a newer version of the iPhone, and sales in China stalled. Even more alarming, it turned out that the iPhone generated two-thirds of Apple’s revenue in 2015—a very risky reliance on a single product.

So yes, Apple has been a revolutionary company. It’s still a major player in the world of tech. And it will likely be able to keep paying nice dividends for years to come.

It has also shown signs of innovating again, or at least staking out territory where it might free itself of that dangerous reliance on the iPhone. In 2015, for example, it launched Apple Music, a music streaming service. This is Apple’s bid to once again monetize music the way it did with iTunes, and is a direct competitor with Spotify and Google Play. A subscription-based (as opposed to advertising-supported) service, Apple Music gained 10 million subscribers in its first six months–a respectable number and a good potential source of revenue in the future.

Another huge thing to consider is the huge amount of cash Apple has sitting in the bank. If they wanted to, Apple could theoretically purchase another ginat like Yahoo or Tesla with that pile of cash. Depending on what Apple decides to do with all this cash will prove to be a huge indicator in the direction of the company’s future.

But things like Apple Music are not the game changers that Apple II, the Mac, and the iPhone have proven to be. That means you should be careful about investing in Apple right now–and keeping your eye on those revenue figures. It has been one heck of a party for investors, but that party may already be over.